Budget 2026 Income Tax Change Expectations Highlights: Like every Union Budget, this year too taxpayers are carrying a long wishlist for Budget 2026-27, and tax relief is right at the top. As Finance Minister Nirmala Sitharaman prepares to present Union Budget 2026–27 on February 1, expectations are high among salaried employees, middle-class households, senior citizens and investors. This will be Sitharaman’s ninth straight Budget and the third full Budget of the Modi 3.0 government.
One of the biggest talking points ahead of Budget 2026 is the new tax regime. After nil tax on income up to Rs 12.75 lakh and two rounds of slab revamps in recent years, salaried taxpayers are asking what more relief is possible. Many experts believe the government may now push harder to make the old tax regime irrelevant, though millions of taxpayers still rely on deductions such as Section 80C, Section 80D and home loan benefits.
Budget 2026 income tax expectations: New vs old tax regime, slabs and rebates under spotlight
The Section 87A rebate is another major expectation. From Rs 5 lakh earlier, the rebate now effectively offers zero tax up to Rs 12 lakh under the new regime. The middle class is hoping Budget 2026 could extend this relief further, possibly up to Rs 15 lakh, to counter inflation and rising living costs. Alongside this, there is demand for parity in standard deduction benefits between the new and old tax regimes after the recent hike to Rs 75,000.
Capital gains taxation is also on the radar. After frequent changes to equity, debt mutual funds and property tax rules, investors want Budget 2026 to simplify holding periods, rates and indexation-related provisions. Similar clarity is being sought on home loan tax benefits, especially after slab overhauls that have reduced the relevance of traditional deductions.
Budget 2026 tax wishlist: Capital gains, home loans and retirement savings in focus
Retirement taxation remains another focus area. With higher employer contributions allowed under NPS, savers are now looking for further tax clarity on EPF, NPS withdrawals, annuities and even mutual fund–linked retirement schemes. Senior citizens and pensioners are expecting more relief on pension income, healthcare deductions and compliance requirements.
Tax administration issues are also part of taxpayers’ expectations from Budget 2026. Delays in income tax refunds, AIS mismatches, scrutiny notices, TDS and TCS complications, and faceless assessment concerns have led to calls for easier compliance and faster resolution. The new Income Tax Bill 2025 and the shift to the “Tax Year” concept from FY 2026–27 have added to expectations of simpler ITR filing and clearer rules.
Overall, Budget 2026 is being seen as a test of whether the government can balance tax simplicity with meaningful relief. While big tax cuts may be unlikely, taxpayers are hoping for predictable policies, fewer disputes and a system that rewards honest compliance.
Union Budget 2026: Will senior citizens get special income tax slabs under new tax regime?
Budget 2026 Income Tax Expectations Live Updates: With the new tax regime now the default option, experts say senior citizens may be losing out on age-based benefits that were available under the old regime, such as higher basic exemption limits. Ahead of Union Budget 2026–27, there is growing expectation that the government could consider special income tax slabs, higher exemption thresholds or targeted rebates for senior citizens under the new tax regime. Experts argue that such a move would recognise retirees’ fixed incomes, rising healthcare costs and longer life expectancy, while making the transition away from the old tax regime fairer for senior citizens.
Union Budget 2026: Real estate seeks industry status and higher home loan interest deduction
Budget 2026 Income Tax Expectations Live Updates: According to Suresh Garg,CMD,Nirala World, like every year, the real estate sector has expectations from the Union Budget 2026–27. He said the government should grant the real estate sector industry status and increase the home loan interest deduction limit from the current ₹2 lakh to at least ₹5 lakh, adding that a 100% deduction would be even better. Garg said apart from these measures, the sector does not have any other expectations from this year’s Budget.
Union Budget 2026: Will senior citizens get special income tax slabs under new tax regime?
Budget 2026 Income Tax Expectations Live Updates: With the new tax regime becoming the default option, experts say senior citizens could be left at a disadvantage as age-based exemptions available under the old regime no longer apply.
Ahead of Union Budget 2026–27, there is growing expectation that the government may consider special income tax slabs, higher basic exemption limits or targeted rebates for senior citizens under the new tax regime. Such a move, experts argue, would recognise retirees’ fixed incomes, rising medical costs and longer life expectancy while encouraging a smoother shift away from the old tax regime.
Key deductions and limits under Old Tax Regime: What taxpayers can claim
Budget 2026 Income Tax Expectations Live Updates: Under the old income tax regime, taxpayers can claim multiple deductions across different sections, with no single overall cap. The key deductions include Section 80C (up to ₹1.5 lakh) for PF, PPF, ELSS and home loan principal; Section 80CCD(1B) (additional ₹50,000) for NPS self-contribution; and Section 80CCD(2) for employer NPS contribution—up to 10% of salary for private employees and 14% for government staff, with no monetary ceiling.
Health insurance benefits under Section 80D allow deductions up to ₹1 lakh, while Section 24(b) offers up to ₹2 lakh on home loan interest. Taxpayers can also claim unlimited interest on education loans under Section 80E, deductions on donations under Section 80G, a ₹50,000 standard deduction, ₹50,000 interest deduction for senior citizens under Section 80TTB, and ₹10,000 savings interest under Section 80TTA.
Union Budget 2026: Real estate sector pushes for higher home loan tax relief and infra status
Budget 2026 Income Tax Expectations Live Updates: Highlighting key pre-Budget demands, Dinesh Gupta, President, Credai Western UP said the real estate sector expects Union Budget 2026–27 to focus on affordable and mid-income housing.
He called for a higher tax exemption on home loan interest, relief under Sections 80C and 24(B) of the Income Tax Act, and easier, affordable funding mechanisms for stalled projects. Gupta also said recognising real estate as an organised industry, granting infrastructure status and clearing pending dues of development authorities would significantly improve the investment climate and boost investor confidence.
Union Budget 2026: Will new tax regime finally get meaningful deductions?
Budget 2026 Income Tax Expectations Live Updates: With the new tax regime now the default option, taxpayers are increasingly expecting Union Budget 2026–27 to introduce meaningful deductions within this structure. Currently, most popular benefits such as Section 80C, 80D and home loan deductions are unavailable under the new regime, limiting its appeal beyond lower tax slabs. Experts say Budget 2026 could consider selective deductions for health insurance, retirement savings or housing to make the new tax regime more balanced, equitable and attractive for long-term financial planning.
Union Budget 2026: SBI Research backs extending Section 80D benefits to new tax regime
Budget 2026 Income Tax Expectations Live Updates: SBI Research has recommended that the government extend Section 80D health insurance tax benefits to taxpayers opting for the new tax regime in Union Budget 2026–27. In its report Prelude to Union Budget 2026-27, SBI Research said such a move could improve affordability and encourage first-time buyers to opt for insurance. The recommendation comes as insurance penetration in India slipped to 3.7% in FY25 from 4.2% in FY22, posing challenges to IRDAI's goal of achieving ‘Insurance for All by 2047'.
Union Budget 2026: Why income tax refunds are delayed for over 50 lakh taxpayers
Budget 2026 Income Tax Expectations Live Updates: More than 50 lakh income tax returns are still awaiting processing, leaving taxpayers anxious about delayed refunds. One of the key reasons flagged by experts is data mismatch between ITR filings and information available in AIS and Form 26AS, often triggered by late TDS updates, incorrect reporting by deductors and system-level validations. Ahead of Union Budget 2026–27, taxpayers are expecting stronger backend integration, quicker reconciliation of data and time-bound refund processing to ensure honest filers are not penalised for procedural gaps.
Union Budget 2026: Forex cards vs credit cards—industry seeks fair TCS rules on overseas spends
Budget 2026 Income Tax Expectations Live Updates: Highlighting disparities in overseas spending taxation, Gagan Malhotra, Chief Operating Officer, BookMyForex, said that while raising the LRS TCS threshold to Rs 10 lakh has eased the upfront tax burden, inconsistencies remain. He pointed out that forex cards continue to attract TCS beyond the threshold, while international credit card spends are excluded, creating an uneven playing field. With outbound travel rising, he said Budget 2026–27 should introduce a harmonised TCS framework across international payment instruments to improve transparency, simplify compliance and reduce liquidity strain on travellers.
Union Budget 2026: Health insurers seek higher 80D limits, GST relief continuity and wider coverage
Budget 2026 Income Tax Expectations Live Updates: Sharing expectations ahead of Union Budget 2026–27, Krishnan Ramachandran, MD & CEO, Niva Bupa Health Insurance, welcomed the government's recognition of health insurance as an essential service and its exemption from GST, saying it has improved affordability for households. He said Budget 2026 should extend Section 80D benefits to taxpayers opting for the new tax regime and review the current Rs 1 lakh deduction limit, proposing an increase to at least Rs 1.5 lakh. He also called for including personal accident and travel insurance under Section 80D to promote holistic risk protection amid rising healthcare costs and increasing longevity.
Union Budget 2026: Insurance sector seeks push for parametric cover and preventive healthcare
Budget 2026 Income Tax Expectations Live Updates: Sharing pre-Budget views, Anup Rau, MD & CEO, Generali Central Insurance Company Ltd, said Union Budget 2026–27 should strengthen India’s health systems and financial resilience through targeted measures. He suggested earmarked budgetary support for parametric insurance to deal with catastrophic events and protect vulnerable communities. Rau also emphasised encouraging preventive health screenings for early diagnosis and lower long-term healthcare costs, and called for a common industry-wide data platform to curb fraud, improve transparency and build a more resilient insurance ecosystem.
Union Budget 2026: Your Rs 12 lakh annual income is not tax free if your source of income is this?
Budget 2026 Income Tax Expectations Live Updates: The last budget made an annual income up to Rs 12 lakh tax-free and with availability of Standard Deduction Rs 12.75 lakh. But if this Rs 12.75 lakh also has capital gains, then a tax liability arises.
While Section 87A rebate has effectively made income tax nil for total income up to Rs 12 lakh under the new tax regime, taxpayers earning capital gains continue to face a disparity.
Long-term and short-term capital gains on equities are taxed separately, even when total income remains below the rebate threshold.
Ahead of Union Budget 2026–27, experts and investors are expecting the government to address this gap by allowing Section 87A rebate to offset LTCG and STCG for lower-income taxpayers, ensuring equitable tax treatment and reducing unintended tax burdens on small retail investors.
Union Budget 2026: With labour codes rolled out, what more relief and clarity can workers expect?
Budget 2026 Income Tax Expectations Live Updates: With India’s four labour codes already notified, expectations from Union Budget 2026–27 are now centred on smoother implementation, clearer rules and stronger enforcement.
The codes standardise wage definitions, introduce a national floor minimum wage, expand social security to gig and platform workers, mandate appointment letters, allow night shifts for women with safeguards, and provide free annual health check-ups for workers above 40. Stakeholders are hoping Budget 2026 will announce funding support, timelines and compliance simplification to ensure the benefits of these reforms reach workers and employers without increasing regulatory burden.
Union Budget 2026: Will old tax regime deductions like 80C, 80D and home loans get a final boost?
Budget 2026 Income Tax Expectations Live Updates: Deductions under the old tax regime, including Section 80C, Section 80D and home loan benefits, have remained unchanged for several years, even as inflation and costs have risen sharply. With repeated slab reliefs under the new tax regime, taxpayers fear these deductions may lose relevance or face a gradual phase-out. Ahead of Union Budget 2026–27, many are hoping FM Nirmala Sitharaman either revisits these limits one last time or clearly signals the future of the old tax regime to aid long-term tax planning.
Budget 2026: New vs old tax regime—what freelancers must watch out for
Budget 2026 Income Tax Expectations Live Updates: Under the default new tax regime, freelancers enjoy lower rates with nil tax up to Rs 4 lakh and the 30% slab only beyond Rs 24 lakh. The Section 87A rebate can even make tax nil up to Rs 12 lakh in cases like presumptive taxation under Section 44ADA. However, regime-switching restrictions and loss of deductions remain pain points, prompting hopes that Budget 2026 will simplify choices for freelancers and small businesses.
Union Budget 2026: Will freelancers and professionals get tax slab relief?
Budget 2026 Income Tax Expectations Live Updates: As Union Budget 2026 approaches, freelancers, professionals and small business owners are closely tracking possible changes in income tax slabs and relief measures. While tax rates remain the same across income types, self-employed taxpayers say the limited deductions under the new tax regime and complex switching rules make tax planning difficult. Expectations include simpler rules, better clarity and possible slab tweaks to ease the burden on independent earners.
Budget 2026: AMFI seeks LTCG exemption hike to ₹2 lakh to boost long-term investing
Budget 2026 Income Tax Expectations Live Updates: The Association of Mutual Funds in India (AMFI) has pitched for increasing the long-term capital gains (LTCG) exemption limit on equity investments to ₹2 lakh from the current threshold. AMFI argues that a higher LTCG exemption under Union Budget 2026–27 would encourage long-term investing, protect small retail investors from frequent tax changes, and align capital gains taxation with the government’s broader goal of promoting household participation in financial markets.
Union Budget 2026: Pension reforms in focus as ageing population reshapes retirement planning
Budget 2026 Income Tax Expectations Live Updates: Highlighting the urgency of stronger retirement planning, Vishwajeet Goel, Head of Pensionbazaar.com, said India’s rapid demographic transition makes pension reforms critical. With over 14 crore Indians already above 60 and the share expected to nearly double by 2047, he said Budget 2026–27 should strengthen the National Pension System by extending tax benefits under the new tax regime to both salaried and self-employed individuals, and by allowing tax benefits on voluntary NPS contributions independent of employer participation to encourage long-term, disciplined retirement savings.
Budget 2026: In-person hearings needed alongside faceless tax assessments, say experts
Budget 2026 Income Tax Expectations Live Updates: Rahul Jain, Partner at Khaitan & Co., said that although faceless assessments and appeals allow video-conferencing, complex tax matters often require deeper factual and technical discussions. He suggested that Budget 2026–27 should consider allowing optional in-person hearings with adequate safeguards, enabling taxpayers to better explain complex issues while retaining the benefits of the faceless system.
Union Budget 2026: Tax experts flag delays in appeals, seek binding disposal timelines
Budget 2026 Income Tax Expectations Live Updates: Highlighting a key administrative concern, Rahul Jain, Partner at Khaitan & Co., said that while faceless tax proceedings have improved transparency, a severe backlog at the first appellate level has led to prolonged delays and cash flow stress for taxpayers. He said Union Budget 2026–27 should introduce a statutory, binding timeline for disposal of first-level appeals to ensure faster resolution and reduce uncertainty.
Union Budget 2026: Will govt cap surcharge rates to boost investment and compliance?
Budget 2026 Income Tax Expectations Live Updates: With the highest surcharge at 25% under the new tax regime and 37% under the old regime, the effective tax rate for individuals rises to about 39% and 42.74% respectively.
Ahead of Union Budget 2026–27, tax experts are pitching for a uniform cap of 15% on surcharge, arguing that lower peak tax rates could spur investment activity, improve tax compliance and ultimately help the government garner higher revenues over the medium term.
Govt to finally phase out Old Tax Regime in this Budget?
Budget 2026 Income Tax Expectations Live Updates: What we have seen over the last three budgets, there is a clear sign that the government wants people to migrate to a deduction-free tax regime with slab rates, offered under the New Tax Regime. Around 80% taxpayers are already under the new tax regime, it is highly unlikely that FM Sitharaman would give any relief to taxpayers under the old regime.
For an effective phase-out of the old tax regime, granting tax deduction for house rent allowance and interest paid on self-occupied property under the new tax regime should be seriously considered in the Budget 2026. Both these items reflect the cost of living which significantly impact the net cash position in the hands of majority of the taxpayers.
Union Budget 2026: Tax clarity sought on earn-outs and contingent payouts in M&A deals
Budget 2026 Income Tax Expectations Live Updates: Flagging a key concern from the M&A and private equity taxation perspective, Rahul Jain, Partner at Khaitan & Co., said current capital gains rules create uncertainty where deal consideration includes earn-outs or contingent payouts linked to future performance. In many M&A transactions, part of the consideration is payable only on meeting specific conditions, and courts have held such amounts should not be taxed in the year of transfer. He said Budget 2026–27 should clearly provide that contingent payments are taxable only in the year of actual receipt to bring certainty and reduce litigation.
Budget 2026 needs to shift India's health mission from insurance for all to healthcare for all
Budget 2026 Income Tax Expectations Live Updates: "Budget 2026 is a chance to correct a structural imbalance in India’s health insurance system. While group health insurance covers nearly half of insured Indians, it receives no tax support, even as retail insurance enjoys tax benefits," says — Mayank Kale, CEO & Co-founder, Loop Health.
"Zero-rating GST on group health premiums and allowing full input tax credit can significantly lower costs for employers and unlock greater investment in preventive care. With the New Tax Regime reducing the relevance of Section 80D, it’s time to shift incentives toward prevention, early detection, and regular health monitoring. Supporting workforce health isn’t just a social priority—it’s an economic one. Budget 2026 must shift India’s health mission from insurance for all to healthcare for all."
Budget 2026: Govt to restore tax parity to debt mutual funds? What experts demand
"When we approach budget 2026, one reform that can meaningfully strengthen the Indian capital market could be to restore tax parity for debt mutual funds and extend the same equity-like tax treatment to AIF. When indexation benefit for debt mutual funds was removed in March 2023, there was an immediate impact," says Rahul Bhutoria, Director and Co-Founder, Valtrust.
"Thus, it clearly shows that how sensitive long-term capital is to tax policy. After the announcement of March 2023, long-term investors stepped back, leading to weakening of inflows. The attractiveness for debt has reduced at a time when India needs a stable long-term funding. Hence, restoring tax parity will not only bring household and HNI capital back into debt funds, but it'll also deepen the bond market liquidity and provide critical financing for corporate, for private trade, as well as infrastructure."
If the same logic is applied to AIF, AIF today manage approximately 13 lakh crores, and they fund sectors, where traditional capital often doesn't reach, he noted.
"So, giving them equity-like tax treatment will unlock more domestic and patient capital and strengthen India's private market. Now, the government has already moved in this direction by aligning equity oriented Specialized Investment Funds (SIF) with equity taxation. Extending this framework to debt mutual fund and AIF would be a logical next step".
Budget 2026: Experts pitch 'Exclusion Ratio' model for fair annuity taxation
Budget 2026 Income Tax Expectations Live Updates: Shilpa Arora, Co-founder and COO of Insurance Samadhan, has recommended that Budget 2026–27 tax only the interest portion of annuity payouts. She suggested adopting the global “Exclusion Ratio” model, where part of the payout is treated as a return of capital and exempt from tax. The move, she said, would create a fairer retirement safety net and ensure retirees are not penalised for choosing stable, lifelong income products.
Union Budget 2026: Why annuity taxation is hurting senior citizens’ retirement income
Budget 2026 Income Tax Expectations Live Updates: Highlighting a key retirement taxation issue, Shilpa Arora, Co-founder and COO of Insurance Samadhan, said annuity payouts in India are taxed inefficiently, as retirees often end up paying tax on the return of their own capital. Unlike fixed deposits or mutual funds, where only interest or capital gains are taxed, annuity income is frequently taxed in full, discouraging adoption among senior citizens and making annuities less attractive than products like the NPS.
Union Budget 2026: Insurance sector flags 80D relief, Ayushman Bharat expansion and PMFBY reforms
Budget 2026 Income Tax Expectations Live Updates: Sharing expectations from Union Budget 2026–27, Ashwani Dhanawat, Executive Director and Chief Investment Officer, Shriram General Insurance, said expanding health insurance coverage to OPD care, diagnostics and medicines under government schemes like Ayushman Bharat could significantly reduce out-of-pocket expenses.
He also highlighted the need for higher funding and faster, tech-enabled claim settlements under PMFBY to protect farmers, and called for an ARC-like mechanism to resolve long-pending motor insurance ‘pay and recover’ claims, aligning reforms with India’s “Insurance for All by 2047” goal.
Union Budget 2026: Health insurance sector seeks higher 80D limits and senior citizen relief
Budget 2026 Income Tax Expectations Live Updates: Commenting on expectations from Union Budget 2026–27, Ashwani Dhanawat, Executive Director and Chief Investment Officer, Shriram General Insurance, said enhancing Section 80D limits to ₹50,000 for individuals and Rs 1 lakh for senior citizens could help address rising healthcare costs. He also called for extending full tax benefits to senior citizens with standalone health policies and stressed the need for better integration of insurance with quality healthcare delivery to reduce out-of-pocket expenses
Budget 2026: Real estate sector seeks higher tax benefits on home loan interest
Budget 2026 Income Tax Expectations Live Updates: End-user demand in the real estate sector and investor confidence would be significantly boosted by rationlisation of stamp duty, enhanced tax benefits on home loan interest, feels Sidharth Chowdhry, Managing Director, Dalcore.
"Additionally, extending infrastructure status benefits and easy access to long terms, low cost financing for developers will help push high-quality project execution. With Gurugram emerging as a global residential and commercial hub, a forward looking budget can further strengthen NCR's position as a preferred destination for both domestic and global real estate investments," he said.